Fossil Fuel Subsidies Continue to Rise, Thwarting Climate Goals

Despite their 2016 pledge to eliminate fossil fuel subsidies by 2025, G7 countries have made little progress in reducing taxpayer funding to oil, gas, and coal industries. A new report by Greenpeace highlights this issue. Rather than reducing subsidies, most of the G7 nations have actually increased their financial support for fossil fuel producers in 2023.

In total, G7 governments spent a staggering $1.36 trillion (€1.32 trillion) on fossil fuel subsidies in 2023. This marks a 15% increase since the pledge was made, undermining global efforts to transition to clean energy and meet climate targets.

Which G7 Countries Are Subsidizing Fossil Fuels the Most?

Among the G7 nations, Italy saw the most significant increase in subsidies, with a 166% rise from $17 billion (€16.4 billion) in 2016 to $46 billion (€44.5 billion) in 2023. Germany also contributed significantly. It added $37.4 billion (€36 billion) to its fossil fuel subsidies, a 49% increase over the past seven years.

The US remains the largest spender on fossil fuel subsidies, with $790 billion (€765 billion) directed towards fossil fuels in 2023. Japan followed with $269 billion (€260 billion), while Germany came in third with $114 billion (€110 billion) in subsidies.

France and the UK also increased their subsidies by $12.6 billion (€12 billion) and $10.4 billion (€10 billion), respectively. The UK’s rise represented a 22% increase, while France’s subsidies grew by 40%. The only G7 country to reduce subsidies was Canada. It saw an 11% decrease in its fossil fuel spending, from $44 billion (€42.5 billion) to $39 billion (€37.8 billion).

Why Reducing Fossil Fuel Subsidies Is Crucial

Fossil fuel subsidies distort the energy market by making oil, gas, and coal cheaper. This reduces the competitiveness of clean energy technologies. This makes it more difficult for renewable energy projects to attract investment and gain market share. The G7’s promise to phase out subsidies was meant to remove this barrier and help accelerate the transition to clean energy.

The elimination of these subsidies is widely regarded by energy experts as one of the most effective ways governments can meet their Paris Agreement climate commitments. By continuing to subsidize fossil fuels, G7 nations are reinforcing dependence on these energy sources, which further exacerbates global warming.

Moreover, these subsidies disproportionately benefit wealthier individuals who have larger carbon footprints. For lower-income groups, subsidies help keep energy costs lower, but without them, energy would become unaffordable for many.

Greenpeace urges governments to reallocate funding from fossil fuel subsidies to support a just and sustainable transition to clean energy. The urgency is especially clear given the record fire damage, climate-driven disasters, and the massive profits earned by fossil fuel companies in recent years.